Fitbit (NASDAQ: FIT) reported stronger than expected first quarter results on May 1. In addition to meaningfully beating top line and bottom line expectations, the results included multiple, other items that are tremendously positive for Fitbit stock.
The company’s revenue rose 10% year-over-year, its tracker revenue rose YoY for the first time in three years, its smartwatch revenue soared 117% YoY, and the revenue it obtains from companies and insurers jumped 70% YoY.
Furthermore, FIT did not raise its 2019 guidance, but said it was not doing so only because it chose to be “prudent,” a code word for conservative.
A Closer Look at FIT
Still, Fitbit stock fell meaningfully, as investors chose to focus on the few negative aspects of the company’s results, including lower average selling prices and conservative Q2 guidance.
I believe that these investors are making the classic mistake of focusing on the trees instead of the forest. That’s because I think that FIT has a tremendous monetization opportunity that will enable Fitbit stock to at least double over the next year or two. Fitbit’s strategy for monetizing its users on a massive level is becoming clear.
FIT CEO James Park reported that a large study of diabetes prevention methods found that people who used Fitbit devices, “were more active and lost more weight during the program than those who did not and were more likely to be engaged in the platform a year later.”
Additionally, subjects who used Fitbit devices averaged an hour more activity per week for much of the program than those who did not, he stated.
Clearly, people who use step-tracking devices are more active and, consequently, less like to have diabetes, heart disease and some forms of cancer than those who do not use such devices.
As I’ve written previously, insurers and employers have tremendous incentive to keep their employees and clients healthier.As a result, they will likely be willing to pay meaningful amounts of money to do so.